You have a vehicle that’s subject to the luxury vehicle depreciation limits when you buy and place in service a new or used:
- automobile with a curb weight (no people or cargo) of 6,000 pounds or less, or
- pickup truck, van, or crossover vehicle with a gross vehicle weight rating (GVWR) of 6,000 pounds or less. (The manufacturer finds the GVWR using the government’s method. You don’t get to find a personal GVWR using people you select or your own cargo weights.)
Tax law limits depreciation deductions on what it considers luxury vehicles.
The Tax Cuts and Jobs Act created 100 percent bonus depreciation, and that means you can totally deduct the cost of qualifying assets. One major exception is the $8,000 bonus depreciation cap that applies to a tax law-defined luxury automobile, crossover vehicle, pickup truck, or sport utility vehicle (SUV).
With bonus depreciation, your maximum first-year deduction on a luxury classified vehicle is $18,000 (2018 amount—this will be adjusted for inflation in 2019).
You can elect out of bonus depreciation, but you must do that on an asset class basis. Vehicles are in the five-year class. To elect out of bonus depreciation on a vehicle, you have to elect out of bonus depreciation on all assets in the five-year classification.
Note that you have to ELECT OUT. This is unusual, because for most tax options, you have to elect the treatment (opt in).
If you would like to discuss how to avoid the vehicle luxury classification and to qualify for a first-year deduction of greater than $18,000 on your vehicle, please do not hesitate to reach out to your team at Luster Tax Consulting to work through this with you. Please use the following link to book your complimentary strategy call with your team at Luster Tax Consulting.